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Multi-Channel Distribution in the Apparel Industry

The results of the study clearly show that multi-channel distribution is now mainstream within our industry. By Peerless Research Group for SDI Group

Supply chain executives in the apparel retail industry have been debating strategies for managing and integrating disparate order taking and fulfillment processes and operations.

Operations managers are divided on whether a multi-channel distribution platform or a single distribution channel for handling order requests, regardless of how the order is placed, is the most operationally efficient and cost-effective answer.

This white paper details the results of a survey of multi-channel distribution within the apparel industry. The results clearly show that multi-channel distribution is now mainstream within our industry.

It perhaps is of little comfort, but clearly our industry professionals are facing a common challenge of how to manage multi-channel distribution within a complex and rapidly evolving multi-sales channel environment.

Our growth increase is difficult to fathom. We find better ways to do things every day. We have to continue to evolve with the industryManager; <$50M in revenues

To complement the results of the survey, we would like to briefly offer a perspective of multi-channel distribution. Our perspective has formed through witnessing the challenges our clients face and succeeding in developing cost effective solutions to meet the demands of the multi-channel environment.

Only just a few years ago, the term multi-channel distribution was rarely used among our clientele. Certainly many of our clients were shipping through multiple channels, but often a channel, especially e-commerce, was either handled through a 3rd party or as a purely manual process tucked in a corner of the facility.

Today, practically all of our clients handle multiple channels of distribution and increasingly the trends are to:

  1. Bring outsourced volumes back in-house
  2. Embrace the concept of performing multi-channel distribution within a single facility
  3. Increase levels of automation

We believe there are several factors driving these trends. Arguably the catalyst is that volumes shipped through non-traditional channels have grown significantly; it is now a matter of urgency that this flow is handled effectively and efficiently.

In reaction to this growth, information systems have developed and are now capable of handling multiple channels within the same system often using the same inventory. Having a common inventory provides great flexibility and responsiveness to sales demands from any channel, while lowering inventory carrying costs.

A common inventory can help reduce shipping costs and traditional shipping methods can be leveraged to facilitate, for-example, in-store pick-ups of merchandise ordered on-line at a very minimal marginal cost of freight.

Adoption of distribution strategies

With a single facility and single information system, many physical flows can be combined into common flows regardless of channel. With common flows there is now greater movement to justify higher levels of automation, which in turn can dramatically reduce labor costs; this is particularly important for the very labor intensive e-commerce distribution channel.

Similarly, with the growth of non-traditional flows, there is greater volume to justify automation of specific tasks related to that channel, for example, automated packing for e-commerce orders.

By using a single facility, a single material handling system can be designed for all distribution channels and still meet service levels. Investment costs can be much lower as the systems are shared, and often there are no cost increases, especially if equipment capacity thresholds have not been exceeded as a result of combining channels.

The combined peak flow rate –which is a significant driver of material handling system investment–of multiple channels is also usually lower than the sum of the individual peaks of each channel. Again, a single, common system can save costs.

A single facility also arguably lowers an aspect of risk; if there are large shifts of volumes between sales channels, most of the systems and investment associated with a single multi-channel distribution solution can still be utilized. If distribution systems are exclusive to a single sales channel, if there is a shift in volumes between sales channels, one system could easily become under-utilized, whereas the other system would need further investment to handle the increased volumes.

In sharing this perspective, we recognize that there are exceptions to the trends, and have seen very valid reasons associated with these exceptions. For example, the magnitude of volume and/or size of existing facilities may limit the ability to combine all flows within a single facility.

Where Are Retailers on the Technology Adoption Curve?
A snapshot of these manufacturers’ and retailers’ operations shows that organizations are using a range of sortation systems at their facilities.

Roughly one out of three use pop-up wheel and tilt tray sorters while at least one out of every four use cross belt, garment-on-hanger, push-off diverts and slat shoe sorters. On average, these companies are using more than two different types of sortation and conveying systems at their facilities.

While a few companies sit on the ‘bleeding edge’ and lead the way for adopting new technology, the majority are inclined to take a wait-and-see position and only embrace new solutions once applications have proven successful. With the so-called ‘majority’ delaying acceptance, are those who are early adopters gaining a competitive edge over those who hang back?

Survey Results
To better understand the issues those in the apparel distribution industry face and how they are addressing these challenges, Peerless Research Group conducted a study on behalf of SDI Industries, a leading provider of materials handling services and solutions across a range of industries, to examine current and future distribution strategies and how these organizations are developing and handling order and fulfillment processes.

For this study, we interviewed 55 top-level supply chain executives at major apparel retailers and distributors. Many companies in this industry are grappling with the complexities of multi-channel distribution structures yet a variety of options to successfully approach order fulfillment and distribution tasks exist.

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Multi-Channel Distribution in the Apparel Industry

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